Startup rules to live by: Raise money when you don’t need it

Raising millions of dollars for your startup seems great, but in reality you are expected to perform and provide a positive return on investment for your investors. Anything short of this spells future disaster for you and your company.

Taking on this investment enables you to take your startup to the next level. It is an exciting, nerve-wracking, stressful and time-consuming process to close a round of financing, and if you can pull it off you better walk away feeling confident, not scared. The last thing you want to do is take someone’s money and doubt yourself about whether your company will actually succeed. Telling someone they are going to lose all their money is far more stressful than raising money will ever be. Overall, try to never go there.

From my experience growing my company, Rivolix, I have found it much easier to talk with investors the minute my company started generating revenue. Revenue is your saving grace, and the conversations with investors post-revenue is like day and night. There is just a whole lot less to argue about when money comes in the door. Like the old saying goes, “Cash is king,” and this is certainly the case when raising money.

Here are three tips to raising money for your startup:

1. Raise money when you don’t have to.

This may sound like an oxymoron, but it is the honest truth. It means your startup is generating enough money to grow organically. The money you are looking to raise is meant only to supercharge this growth. Not only will you have the upper hand when talking with investors, chances are you have the choice to select which investors you want to work with. From my experience, if investors hear that your startup is making money, they will find you.

2. It is not about how much you raise, it is about about how much you earn.

Realizing this will make you so much more successful in the long run. Why? It is the truth. Raising millions of dollars that does not belong to you is just that — money that does not belong to you. You want to be able to build a business that can sustain itself, prosper and, most important, turn a profit. Profit is the name of the game, not dilution through fundraising.

3. Raise money to grow fast, not sustain

The point of raising money is to supercharge the growth of your business. You want to have product/market fit, customers and a clear plan to use this money to make more money. The last thing you want to do is raise money to sustain your business. This process involves significant dilution, loss of trust and loss of control. As an entrepreneur, you are in the business of working for yourself, not someone else.

Will Caldwell, a San Diego resident, is the CEO and co-founder at Rivolix, a mobile real estate tech company that helps Realtors generate more word-of-mouth leads.